Vaasa Yliopisto
Course: Sisäinen Laskentatoimi
Code: LAS. 132
Date: 30/05/05
Please answer all questions in SECTION A, and any four in SECTION B.
Answer in Finnish of English
SECTION A
Answer all questions
Question 1
- What are the major purposes of accounting systems?
- What are the three important roles that management accountants perform?
- What three different types of inventory that manufacturing companies hold?
- Define product cost. What are the different purposes for calculating product cost?
- What is the difference between actual costing and normal costing?
- Define master budgeting.
- Define rolling budget.
- "The sales forecast is the cornerstone of budgeting". Why?
- What are the main characteristics of JIT purchasing?
- What are implications of JIT on management accounting?
20p
SECTION B
ANSWER ANY FOUR QUESTIONS
Question 2 (Flexible budget and variances)
ABB manufactures and distributes transformers to its customers. ABB's plan for 2002 forecast sales of 600,000 caps. However, only 500,000 transformers were sold. Based on the data provided in the Table below, determine the missing numbers and complete the analysis. Costs and revenues in euros.
ActualFlexibleFlexibleSalesStatic
resultsbudgetbudgetVolumeBudget
variancesvariances
Units sold500,000600,000
Revenues5,000,0004,800,000
Variable cost1,400,00018,00,000
Contribution1, 100,000 F500,000 U
margin
Fixed costs1,150,0001,000,0001,000,000
Operating
income
1. Calculate the budgeted and actual selling price.
2. Assuming that the driver for variable costs is units sold, what are the budgeted and actual variable costs per unit?
3. Calculate the flexible budget operating income.
4. Calculate the total sales volume variance
5. Calculate the total static budget variance.
15P
Question 3 (Inventory management)
ABB purchases 1500 transformers, which is a 6 month supply. The cost per transformer is 10 euros; the ordering cost is 25 euros per order; and holding cost is estimated at 25% of unit value.
(i) What is total cost of the existing inventory policy?
(ii) how much money could be saved if the economic order quantity were applied to the purchase of transformers
(iii) What should be the reorder point if the lead time is 2 weeks?
15p
Question 4 (Performance measures)
Selected sales and operating data for three companies are given below:
ABc
Sales12,000,000 ures14,000,00025,000,000
Average operating assets3,000,000 euros7,00 0,0005,000,000
Net operating income600,000 euros560,000800,000
Shareholder's equity1,500,000 euros2,900,0003 ' 000,000
Minimum required rate of14%10%16%
Return
1. Calculate the ROI for each company.
2. Calculate the residual income for each company
3. Assume that each company is presented with an investment opportunity that would yield 15% rate of return.
a. If performance is being measured by ROI, which company or companies will probably accept the opportunity? Reject? Why?
b. If performance is being measured by residual income, which company or
companies will probably accept the opportunity? Reject? Why?
15p
Question 5 (Absorption costing)
The following data were taken from the records of Atlas Engineering. The company uses variable costing. The data relate to the company's first year of operations.
Units produced:40,000
Units sold37,500
Variable cost per unit
Direct material50 euros
Direct labour30 euros
Variable overheard14 euros
Variable selling costs12 euros
Fixed costs:
Selling and administrative750,000 euros
Manufacturing500,000 euros
How much higher (or lower) would the company's first year net income have been if the company had used absorption costing rather than variable costing? Show calculations.
15p
Question 6 (Cost of quality)
The following information below has been gathered from BOND Company.
ActivityCost (amount in euros)
Quality engineering1,000,000
Warranty claims120,000
Productliability lawsuits200,000
Research of customer needs800,000
Maintenance of test equipment350,000
Returned products200,000
Rework costs600,000
Quality training305,000
Process control monitoring1,000,000
Inspection of and testing of incoming materials900,000
Repair costs in the field250,000
Statistical process control650,000
Product recalls300,000
Waste300,000
Net cost of scrap435,000
Supplier certification400,000
Total sales were 175,000,000 euros.
Prepare a cost of quality report showing the different cost category and a report discussing your finds and recommendations to BOND management
15p
ENJOY THE SUMMER!!!